SpaceX's Disaster Could Be Cubesats' Selling Point

A lot was riding on a satellite launch scheduled last Saturday in Cape Canaveral, Florida. Free Basics, a non-profit consortium of tech heavies headed by Facebook Inc. (FB), planned to use the satellite to beam its free, limited internet services to swathes of broadband-starved sub-Saharan Africa. For Space-Communications Ltd., known as Spacecom, the stakes amounted to more than the eye-wateringly expensive Amos-6 satellite it owned, especially since a takeover offer from Beijing Xinwei Technology Group depended on the launch. The launch also would be yet another win for Elon Musk’s Space Exploration Technologies Corp., or SpaceX, which was responsible for making sure its payload got into space. (For more, see: Facebook’s Giant Profit Opportunity in Africa.)

The Explosion’s Fallout

But the explosion of the SpaceX Falcon 9 rocket in a pre-launch test has sent financial shock waves throughout the industry. For starters, the failure destroyed the satellite, so now Spacecom is scrambling to try to salvage its $285 million tie-up with Xinwei. Skeptical investors have knocked 37% off Spacecom’s market cap—shares trade on the Tel Aviv Stock Exchange—since the explosion. Free Basics, a pet project of Facebook founder Mark Zuckerberg that was previously known as Internet.org, has suffered yet another setback after India’s telecom authority rejected it in February for violating net neutrality. (For more, see: Internet.org: What It Is and How It Works.)

And SpaceX has suffered a major blow to its reputation and perhaps to its finances. Spacecom told reporters Sunday that it may seek $50 million or a free flight from SpaceX. Insurance premiums could rise for Musk’s company as well, the New York Times reported Sunday. SpaceX will have to rebuild the launch platform the explosion destroyed. Whether its pipeline will suffer is not clear. The company said Friday that it has booked missions worth over $10 billion, but the Times pointed out that delays could see business shift to competitors such as France’s Arianspace S.A.


Smaller, Cheaper Satellites

The longest-lasting change to come out of the incident might be to the way satellites are built and deployed. The current model, in which satellites cost hundreds of millions of dollars and may not turn a profit for a decade, is risky in the extreme. There’s no room for Silicon Valley-style trial-and-error, since “failing fast” can be disastrous for business. The technology needs to be reliable for decades, since there’s no way to repair it, so everything is tested within an inch of its life.

But a new model is emerging, one in which satellites are smaller, cheaper, more numerous and—in relative terms—expendable. A June report from the Tauri Group looks at the growth of “very small satellites” or cubesats, which weigh just a few kilograms. Tauri estimates that less than $100 million has been spent on this class of satellites since 2005; 130 were launched in 2014, followed by 108 in 2015.

Industry in Its Infancy

The industry is in its infancy, and problems are just starting to be identified. For example, NASA recently said it had to move satellites to avoid collisions with cubesats. Still, they have much to recommend them, starting with the ability to lose a few without generating headlines. They are already proving their worth in limited applications.

Cubesats may soon move into communications and could one day edge out the expensive behemoths deployed by the big four: Eutelsat Communications S.A., Inmarsat PLC, Intelsat S.A. and SES S.A. Though none has been launched, Tauri’s reports says that at least three low-earth orbit cubesat constellations have been announced for the purpose. OneWeb, a partnership between Intelsat, the Virgin Group Ltd. and Airbus Group Ltd., plans to launch 650 satellites in low orbit to provide coverage to the planet’s remotest areas. SpaceX plans to branch out from just launching others’ satellites to operating its own, with a cross-linked network of 4,000 communications satellites. There are around half that many spacecraft in orbit today. (For related reading, see also: Elon Musk: Biography.)

These satellites do not need a 230-foot Falcon 9 to get into orbit, but could make due with the very small launch vehicles being developed by Virgin Galactic LLC, Firefly Space Systems, Jeff Bezos’ Blue Origin LLC and others.